The digital high street: Dixons and Carphone Warehouse confirm merger

Dixons Retail, the owner of Currys and PC World, and Carphone Warehouse have announced they are to merge into a new company, called "Dixons Carphone".

The £3.8bn deal will see ownership split equally between the two firms' existing shareholders. The companies are set make cost savings of £80m per year by 2018.

If the deal gets the go-ahead, it'll need the approval of anti-trust regulators, with Dixons operating 500 stores in the UK and Carphone Warehouse with over 2,000 stores across Europe.

Four per cent growth by the end of 2016 was forecast, though this'll be partly offset by operational and support function cuts, which'll also mean a two per cent reduction in headcount initially.

When it comes to leading the group, Dixons' boss Sebastian James has been named chief executive and Carphone Warehouse’s founder Sir Charles Dunstone will be taking over as chairman of the combined group.

James has been seeking to increase Dixons exposure to mobile phones for some time. Last month, Carphone Warehouse reported a rise in revenue as the company gained momentum from 4G services, which drove rising levels of data take-up compared to the previous period and helped to push forward average revenue per user.

Dunstone commented:

We have a deep respect for each other and we see the merger of these two great companies as an opportunity to bring our skills together for the consumer and create a new retailer for the digital age. We are also creating jobs and we see many opportunities for further growth.

The merger has been hailed as one “of equals”. Both companies have a focus on service, offering customers something they can’t get from the fierce online competition.

That said, for many, it's high time the trimming the merger will bring about took place. Fellow high street store Currys has already slimmed its estate and Carphone Warehouse has a lot of stores compared to many of its rivals.

Dixons will be able to piggyback Carphone's smartphone and tablet expertise; some analysts have suggested that the "equal" aspect of the deal is harder to see from the point of view of the latter. Cantor Fitzgerald labelled it "more compelling" to Dixons this morning.

Both firms will, however, be to some extent safeguarded against circling competitors by the expansion the merger will bring. Dixons particularly faces a threat from AO.com, formerly Appliances Online.

The coming together of the two bricks-based specialists embodies the changing face of high streets. The stores will sell a greater number of traditional and new products, and expertise can be streamlined, applicable to an increasingly hi-tech product base and climate. Splicing mobile demand with electric domestic appliances means dixons Carphone will be able to contribute, perhaps significantly, to the "Internet of Things".